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Macro Horizons covers the main macroeconomic and policy news events affecting foreign-exchange, fixed income and equity markets around the world, as selected by editors in New York, London and Hong Kong.

WRAP: Economic information from China and Japan over the last couple of days helped maintain the impression of stabilization in Asia. Even though Italian industrial production numbers offered further evidence the euro zone’s recovery will be sluggish, on balance this all provides a positive backdrop for markets. One question weighing on policy makers’ minds, however, is whether the highly accommodative monetary policies of the past year are starting to overheat certain asset markets. There is little sign of consumer inflation in the world’s biggest economies, but housing markets in lots of places are showing worrying signs of excess–the latest being Australia, which reported a pickup in speculative investment home lending. Meanwhile, various measures, including the return of retail investors to the market, have some calling for a correction in the U.S. stock market following a relentless rally over the summer and the first half of the fall.

There is no mystery about the trigger that analysts most worry about for a downturn in investor sentiment: all eyes are on the U.S. Federal Reserve and its plans to taper bond buying. Friday’s sharp rally in U.S. stocks suggested investors think the Fed is restrained from acting until about March, even if the economy warrants a reduction in bond buying. (Hence the glass-half-full read of the stronger-than-expected jobs report.) Any signal to the contrary–during Thursday’s Senate hearings into Fed Vice Chair Janet Yellen’s nomination to take over as Chair of the central bank, for example–and the party could be over. (MC)

CHINA: Data out Saturday showed industrial activity in China picking up steadily in October, while inflation remained within manageable levels. Industrial output rose 10.3% on-year, up from September’s 10.2%; retail-sales growth held steady at 13.3% on-year; and the consumer price index rose 3.2%, up from 3.1% in September. On Monday, other data showed new loans from Chinese banks and a broader measure of credit called total social financing both fell sharply in October.

Growth is re-accelerating after the first quarter’s weakness, and although inflation hit an eight-month high, it wasn’t enough that authorities would consider tightening policy. (Monday’s credit figures also support that position.) Rather, the stable, moderate state of economic activity allows leaders to focus on reform at a key Communist Party plenum that opened Saturday and runs through Tuesday. Key areas ripe for reform include local government financing, land ownership and financial markets, but it is unclear how vigorously the reformers will be able to push their agenda on others at the meeting. Tuesdays’ concluding communique will be closely watched. (MA)

JAPAN: Japan posted a larger-than-expected current account surplus in September, up 14% on-year, but a sharp increase in dividend payments from overseas subsidiaries of Japanese companies masked the fact that Japan’s trade deficit isn’t improving. The current account surplus came to Y587.3 billion (about US$5.87 billion) in September, better than market expectations for a Y430 billion surplus.

Japan’s current account surplus has been on a declining trend in recent years, and has fallen from around 5% of GDP in 2007 to 1% last year–largely due to rising commodity prices and Japan’s greater dependence on imported fossil fuels in the wake of the Fukushima nuclear disaster in 2011. Moreover, much of the strength in October came from companies repatriating profits from overseas subsidiaries to take advantage of the weak yen. Adjusting for that and other seasonal issues, the balance shows a deficit of Y125.2 billion, the largest since the series began in 1996. One of the premises of Abenomics was that a weaker yen would revive Japan’s formidable export machine; so far, that hasn’t happened in a major way. (MA)

AUSTRALIA: Home-loan approvals in Australia rose a seasonally adjusted 4.4% in September from August, highlighting the housing sector’s strong recovery as authorities seek to broaden growth beyond the resources sector.

The Reserve Bank of Australia won’t be happy to see loan growth was especially strong for “investment housing”–speculative buying, in other words. The RBA has signaled its concern over a potential bubble in the housing market after prices in Australian capital cities have risen sharply in recent months, particularly in Sydney and Melbourne. Concern over house prices is one of the primary reasons the RBA is loath to cut interest rates further from their current record low of 2.5%, even though other sectors of the economy could use the boost. It may be time for the central bank to start looking at the kind of targeted measures its counterpart across the Tasman Sea is trying, where the Reserve Bank of New Zealand is hoping to take the froth out of New Zealand’s housing market. (MA)

ITALY: September industrial production was up 0.2% on the month and down 3% on the year, against expectations of up 0.3% on the month and down 3.6% year on year.

The manufacturing purchasing managers’ surveys were positive, but so far little of that optimism has flowed through to the underlying numbers. Italian production has been declining in annualized terms for 25 months now, and the month-on-month upturn is more a sign of bottoming out than recovery. The European Central Bank has a tough job in front of it to get the region’s economies going. (AM)

Coming up:

CHINA: Time N/A. Plenum of the Central Committee continues.

The government has dropped hints that the meeting, which began Saturday in China (Friday night in the U.S.) and continues under a cloak of secrecy until Tuesday, will entail some vital reforms as part of China’s economic and political transformation. Among the changes on the table: a liberalization of China’s centrally controlled financial system of interest rates; an end or changes to the “hukou” system of internal passports, which denies migrant workers access to vital health and education services; an opening of China’s capital account; and fiscal reforms to grant greater taxation powers to provincial governments. All are considered essential elements of China’s difficult but necessary transition from a closed, investment-led economy to a more open, consumer-driven model–the means through which it delicately extracts itself from a risky build-up of debt that threatens future prosperity. But each of those areas entails the risk of massive disruption, which in turn creates political risks, the kind that China’s conservative Communist Party leaders may not be willing to confront. (MC)

GREECE: Time N/A. October government budget deficit (from a deficit of €2.7 billion and net revenue of €38.7 billion in September).

There is tension between the Greek government and its troika of international rescuers over budget promises not kept. This set of figures is unlikely to ease relations. (AM)

U.S., CANADA, FRANCE: Time N/A. Veterans/Remembrance/Armistace Day public holidays.

In the U.S., stock markets will be open, but bonds markets are closed.

The British housing market is roaring ahead. But until wages start to advance, turnover and rising prices will be dependent on credit growth and foreign cash buyers. There are some signs foreigners are beginning to view London, their preferred market, as expensive, while there are questions over how much more debt highly leveraged Britons can load up on. (AM)